By Beni Surpin, Bram Hanono and Joseph Panetta, CEO, Biocom

Historically, the collaborative efforts between the U.S. and Mexico in the Biotech arena, separate from medical devices, have been at the educational level with informal collaboration projects and student exchanges. One of these, of course, initiated the founding of two well known biotechnology institutes in Mexico. In the late 1970’s, a Mexican scientist named Francisco Bolivar participated in the development of the first genetically engineered protein and the development of the first cloning vectors at the University of California, San Francisco. He, along with Luis Herrera-Estrella, returned to Mexico to co-found and direct the Biotechnology Institute of the National Autonomous University of Mexico (UNAM) in Cuernavaca, and the Center for Research and Advanced Studies of the National Polytechnic Institute (CINVESTAV) in Irapuato. 
 

Mexico, therefore, has concentrated its efforts on the development of scientific centers and institutions dedicated to biotechnological research. According to Mexico’s National Science and Technology Council (CONACYT) the number of doctoral graduates in Mexico, specializing in science, has increased five fold over the last decade. In addition, the number of students entering masters degree programs in the sciences has more than doubled since 1995. Unfortunately, Mexico lacks enough high-skilled employment opportunities to absorb these graduates and most graduates are forced to look for temporary postdoctoral fellowships in the United States, Canada, or Europe. With the opportunity to return to Mexico unlikely, all of the intellectual property assets and potentially lucrative products discovered by Mexican scientists are being developed and commercialized outside of Mexico in collaborations with multinational companies. This causes a vicious circle, in that the educational institutions that produce the students and discoveries do not receive the financial benefits of the products developed, while in order to sustain their growth and technological advantage they are forced to place their funding burden upon the government.

However, with the implementation of the right technology transfer and patent policies, and with collaboration with the U.S., both countries could work together, with each participating in R&D projects, to create a biotechnology hub between the U.S. and Mexico. Technology transfer is the process by which results of scientific research, usually from universities, are transferred to the commercial sector through the development and licensing of practical applications for the research. Currently, Mexico has a relatively low number of patents issued annually; however, this doesn’t appear to be as a direct result of a lack of inventiveness. Rather, it seems mostly due to the lack of emphasis and enabling policies in place at institutions for protecting ideas for possible future commercialization, coupled with lack of legislation in place to incentivize institutions to do so. 

In the U.S., prior to the Bayh-Dole Act (the "Act"), U.S. researchers lacked incentive to create commercialized products. Following the passage of the Act in 1980,  individuals and research institutions are now able to protect their ideas and have the incentive needed to pair up with for-profit companies and bring their discoveries into the marketplace. As a result, the biotech industry has grown by leaps and bounds in the U.S. after 20 years of effort by the non-profit sector to stimulate the transfer of technology. The Act gives ownership of discoveries and inventions to universities and other research organizations, that performed the actual research, so long as they commit to the commercialization of the discovery or invention. The research institution is given the right to retain title to patents and create revenue by licensing the patent or selling it entirely to a private company. In addition, the individual pioneers are given the right to compensation under the Act. The private sector, in turn, is given incentive to develop the discovery or invention because they are able to purchase the exclusive rights it from the research institution to produce commercial products. While the government loses funds from the sale of the non-exclusive licenses (since governmental agencies that used to fund institutional research previously owned resulting inventions), it gains revenue from the taxes levied on the sales of products that the private sector sells. The Act, therefore, works positively for all parties involved and creates incentives for research and development.

It is for that reason that the Act has been instrumental in the development of the biotechnology and the life sciences industries. The Act strengthened intellectual property rights in the U.S., contributed to university wealth, and put taxpayer money to use in the development of products for the general public. The key now, is to see to it that Mexico takes similar steps. Although Mexico has taken the first steps to better provide incentives to its scientific community with the passage of the AVANCE and FOCAT initiatives in 2003, Mexico needs to continue to fuel their biotechnology industry and incite an entrepreneurial spirit among its skilled researchers. AVANCE (Raising Added Value in Companies with Knowledge and Entrepreneurs) was aimed at funding start up companies, and FOCAT (Strengthening of Technological Capacities) was aimed at slowing Mexico’s perennial brain drain by subsidizing the employment of successful scientists at Mexican companies. In order to further facilitate technological advances in Mexico, and aid in the transfer of biotechnology across the border, it is with hope that Mexico reaches its fullest potential by instituting policies that mimic the intentions of the Bayh-Dole Act. With collaboration, the U.S. and Mexico can become regional biotech partners and collectively push the biotechnology industry to new levels.

With so many research institutions, universities, and biotechnology companies located in the U.S., it would be opportune for Mexico to become a potential destination for these companies to collaborate in the development and manufacturing of their goods.   While U.S. companies may benefit from the increased and less expensive labor force, Mexico would benefit through the production of jobs for, and development of, skilled labor.

Currently, biotechnology collaboration between the two countries simply mirror the maquiladoras of the later half of the 20th century.  In 2006, trade between the U.S. and Mexico in biotechnology and life sciences goods, as reported by the U.S. Department of Commerce, had reached nearly $3 billion dollars and has experienced an average annual growth of 15% between 2003 and 2006.

While the advent of the maquiladoras benefited both the U.S. and Mexico substantially in the past and continue to serve both countries today, they have been doing so to a lesser capacity as international competition has stiffened. With maquiladoras operating under a wide range of industries spanning from chemical products, garment assembly, food production, and electronic assembly, U.S. companies capitalize, of course, on Mexico’s skilled but less expensive labor force, while creating millions of jobs in Mexico, and assisting in some flow of technology across the border. In reviewing the data, in 2003 there were more than 3,500 maquiladoras in Mexico, 90% of which were located along the U.S.-Mexico border. Although the number of maquiladoras is still strong, and Mexico has a long future in the manufacturing arena, as competition from China and other countries increases, Mexico will need to find other niches to fill, so as to continue growth and expansion of its increasing skilled labor force. 

With some luck, Mexico has already rooted itself in the biotechnology and life science industry by promoting growth in its medical devices production. In 2003, Baja California biomedical device firms employed over 23,700 individuals. In Baja California alone there are about 60 biomedical product companies, of which 40 have U.S. parent companies. The Cluster de Productos Médicos de Las Californias (Medical Products Cluster of the Californias), which is made up of many of Baja California’s largest medical products manufacturers, actively encourages suppliers to expand into Mexico. U.S. companies have followed and as a result new employment has spurred on both sides of the border.

Currently, there are about 170 manufacturing plants operating in Mexico, including most of the industry’s big names:  Pfizer, Bristol-Myers, and Eli Lilly among them. And while there are a number of Mexican pharmaceutical companies operating and performing research, such as Probiomed (Mexico City), Biciclo (San Luis de Potosi) and Laboratorios Silanes (Mexico City), the potential for additional activity is exponential. 

To the extent Mexico adopts policies similar to those of the Bayh-Dole Act, both countries would move beyond the blueprint of the maquiladoras in which most of the R&D occurs in the in U.S. while only the manufacturing portion of the collaboration occurs in Mexico. By Mexico giving incentives to its skilled researchers, it can become a partner with the U.S. in biotech R&D and no longer only focus on manufacturing of medical products. In doing so, and considering that Mexico has the largest pharmaceutical market in Latin America with industry sales expected to reach $14 billion in 2008, Mexico will be able to fully exploit its technological capabilities and accelerate the launch of new discoveries and medications south of the border. This in turn, coupled with full collaborations between researchers in Mexico and the U.S., would greatly benefit the biotech industry in each of the two countries, as well as the region as a whole.

Authored By:

Beni Surpin
(858) 720-8950
bsurpin@sheppardmullin.com

and

Bram Hanono
(858) 720-7461
bhanono@sheppardmullin.com

and

Joseph Panetta, CEO, Biocom